Robert Lee and Others (Claimant/Appellant) v Clarke Osborne and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Norris |
| Judgment Date | 20 December 2007 |
| Neutral Citation | [2007] EWHC 3547 (Ch) |
| Date | 20 December 2007 |
| Court | Chancery Division |
| Docket Number | Case No: HC06CO3014 |
[2007] EWHC 3547 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand
London WC2A 2LL
Mr Justice Norris
Case No: HC06CO3014
This is an application for summary disposal of a claim brought by Mr Lee against Mr Osborne which I propose to grant. I will begin with some uncontroversial background.
The company at the heart of the action (although not since April 2007 a party to the action) is Gaming International (GI). This company was concerned in gaming and real estate development in England, and it had a Japanese operation operating Pachinko parlours. It had acquired the Japanese operation through the acquisition of a Japanese company and the establishment of a joint venture. GI was a fully listed English public company. A Japanese investor, a Mr Suh(?), owned approximately 40 per cent of the listed shares JGI as the result of the acquisition of the Japanese business.
GI was reregistered as a private company in October 2004 as the result of a management buyout. That management buyout provides the context for the dispute. The genesis of the MBO was a disparity in performance between the English and the Japanese operations, the latter essentially supporting the former pending receipt of a stream of development profits. This caused tension with the Japanese investors and had a depressing effect on the share price.
In broad terms, the object of the MBO was to de-merge the Japanese business and get rid of the Japanese shareholders and to develop the English assets. With that object a special-purpose MBO vehicle was used (called TokLon Limited), which was incorporated in February 2004. The chief executive of GI, and one of the prospective members of the MBO team, was the defendant, Mr Osborne. He was a director of GI and held, himself, approximately 3 per cent of its issued shares. He came to be a 76 per cent shareholder in and director and chief executive of TokLon. He is the remaining defendant in this action.
There were two other executive directors of GI. They also participated in the MBO and took between them the other 24 per cent of the share capital of TokLon. In addition to those executive directors of GI there was a non-executive director of GI, Mr Lee, who is the claimant. He is a solicitor of 25-years standing, admitted in England, Hong Kong, Victoria (Australia), California (USA) and Ontario (Canada). He is a former partner of Lovells in Hong Kong. He has established his own legal practice and, in addition, operates a business consultancy specialising in Japan through a BVI company called "InterAsia Consulting Group" (IAC) which used to be but (since immediately before this present hearing) has ceased to be a claimant. This leaves Mr Lee as the only claimant.
Mr Lee had been appointed a director of GI in 2001, effectively to represent the interests of Mr Suh at board level. Mr Suh paid Mr Lee a monthly retainer of £1,000. In addition, Mr Lee was paid, either directly himself or by payment to his legal practice or IAC, a total of £50,000 per annum for services as non-executive director. In total, from the time of his appointment until shortly after the completion of the MBO, Mr Lee was paid about £190,000 by GI in connection with his services, as director. In addition, he was paid approximately £150,000 by Mr Suh for services rendered to Mr Suh. It is clear from the level of those payments that the obligations which he discharged must have been responsible and serious.
The litigation relates to arrangements which Mr Lee says were made before and during the MBO of GI, which he claims gives rise to a right (upon payment) to the grant of interests in TokLon. A number of claims originally made have now been abandoned. All claims brought by IAC are discontinued. All claims made by Mr. Lee against TokLon have been abandoned. All claims made against GI have been abandoned. What survive are claims made by Mr Lee against Mr Osborne personally in contract, in constructive trust or proprietary estoppel, and in respect of a quantum meruit, all founded upon an entitlement to reward for work done.
The defendants apply for summary disposal under an application notice of 24 May 2007. Following that, the claimant applied to amend his Particulars of Claim on 31 August 2007. During the course of the hearing before me, and after Mr Crow QC's submissions made on behalf of Mr. Osborne, the claimant applied to amend further and to substitute revised amended Particulars of Claim, proffering a revised legal analysis and asserting a different contract from that originally pleaded and originally sought by amendment.
For the purposes of the defendant's application, the claimant's case has sensibly been treated as contained in the latest revision of the Particulars of Claim, even though permission to amend or to substitute a revised amendment have not yet been given. In opposition to the defendant's application, the claimant (in consequence of an unless order) filed his evidence. It consists of a witness statement, 213 pages long, containing 529 paragraphs and supported by 13 lever arch files of exhibits. Unsurprisingly, Mr Martin QC's first submission is that this should bring to a grinding halt any application for summary judgment, a submission bolstered by a justifiable time estimate for this hearing of six days and by the lodgement of combined lists of authorities in four lever arch files extending to 62 cases.
Plainly, that submission requires the most serious consideration. When pre-reading the material for this hearing, I reminded myself of the guidance given in Williams and Humbert v WH Trademarks (Jersey) Limited [1986] AC 369 at 435 and 441 and, at the conclusion of my pre-reading, I asked myself whether I harbour doubts about the pleaded case and whether any real advantage would be gained by a possibly lengthy and detailed examination at this stage. As is evident from the fact that I am giving judgment, I decided that I did have doubts and that there was a significant advantage to be gained by addressing those doubts now.
If this case is to be tried it will take two to three weeks, will involve witnesses from abroad, and will occasion expenditure of something in excess of £1 million in the preparation for and conduct of a trial. If there is indeed an obvious answer to Mr Lee's claim, the parties should be spared that cost and the administration of justice relieved of that burden. Therefore, I decided to proceed with the hearing. In the event, the argument at the hearing was conducted almost exclusively in terms of the Particulars of Claim, in their amended and revised versions, and in replies to further information that Mr Lee had provided and also by reference to entirely uncontroversial material. That part of the argument that did enter upon controversial material I place on one side.
The application is brought (as might be expected) under CPR part 3.4 and under CPR part 24.2. These are sufficiently familiar not to require setting out. Although it may be appropriate in some cases to consider first the application made under CPR 3.4, by reference only to the Statement of Case and then to proceed to a consideration under Part 24, by reference to the evidence which has been filed, no such distinction was actually adopted in argument by either side. Given that there was extensive reference to material that I regard as uncontroversial and which has not been specifically pleaded, I propose to consider this application only under Part 24, even though the focus of it will be a legal analysis of the case advanced.
The jurisdiction under Part 24 is now familiar. I do not intend to add to the steady accretion of authority by consideration of the jurisdiction and I simply record in summary form the principles I have adopted. The derivation of my summary will be obvious. My summary is not intended as a restatement but simply a convenient reference to the original statements of principle.
The overall burden lies on the defendant to establish that there are grounds to believe that the claimant has no real prospect of success in his claim and that there is no other reason for a trial. Once a defendant adduces credible evidence in support of that belief, then the evidential burden lies on the claimant to prove some real prospect of success or some reason why there should be a trial. This burden is not an onerous one. The claimant has only to establish a case that carries some degree of conviction beyond the merely arguable. In the conduct of this exercise I must be careful not to embark upon a mini trial. That does not mean that the exercise should be conducted with any less rigour than would be applied at a trial. It merely means that I must not embark upon finding facts by reference to the balance of probabilities, but confine myself to assessing the case by reference to the standard of real prospect of success. Nonetheless, the jurisdiction plainly exists and is there to be exercised.
It may be clear, as a matter of law at the outset, that even if a party were to succeed in proving all the facts he offers to prove, he will not be entitled to the remedy he seeks. In other cases it may be possible to say with confidence before trial that the factual basis for the claim is fanciful because it is entirely without substance. I propose to decide this present application by reference to Mr Lee's pleaded case and key events about which there can be no controversy, either...
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